By Kim Yoo-chul
SK hynix, the world’s second-biggest memory chipmaker, seeking to acquire Japanese firm Elpida to boost its competitiveness, is expected to have second thoughts about a takeover attempt after two unfavorable incidents.
First, Japan’s Toshiba decided Wednesday to drop its joint bid plan with SK hynix, which will require the company to look for additional financial resources for the acquisition.
On top of that, the chipmaker suffered an operating loss of 260 billion won for the first quarter of the year due to weak chip prices and a one-time bonus payment following its acquisition by SK Telecom.
The operating loss is the company’s third straight quarterly loss and following profit of 323 billion won a year ago and a loss of 167 billion won in the previous quarter, SK hynix said in a regulatory filing.
The Korean chipmaker is still reviewing the possibility to join the second round of bidding as it is confidant of selling an increased amount of mobile DRAM chips to Apple for use in its i-branded products if the ongoing deal can be completed.
But cash’’ matters.
Elpida is worth about 5 trillion won, according to market analysts. SK hynix, which is planning to invest 4.4 trillion won in facilities this year, spent some 1 trillion won in the first quarter, allocating the remaining 3.4 trillion won for the remainder of the year.
``SK hynix is in the middle of due diligence on Elpida. It’s too premature to say whether it will push to complete the deal. We will decide later based on the results of due diligence,’’ SK hynix Executive Vice President Kim Joon-ho told analysts and investors in a conference call after releasing the company’s first quarter earnings.
The deadline for second-round bidding, originally set for Friday, has been extended by one week, according to sources.
Kim stressed the Elpida purchase is part of SK hynix’s plan to boost corporate competitiveness and added the, Korean chipmaker will keep to this year’s investment budget.
``But we think SK hynix could create synergy in mobile DRAMs if the company completes the deal as Elpida’s affiliate is included,’’ said Kim.
Elpida manufacturers mobile DRAM chips at its plant in Hiroshima with 40 percent going to Apple. SK hynix executives say the acquisition of Elpida would help boost its customer base.
Apple overtook Hewlett-Packard as the world’s biggest chip buyer last year, according to market research firm Gartner. Unlike conventional DRAMs for PCs, mobile DRAM chips are customized to specifications required by device makers.
SK hynix is increasing its shipment for mobile DRAM and NAND flash chips for Apple’s iPads and iPhones.
``We believe chances are very low for SK hynix to completely acquire Elpida. If it does, then shares of SK hynix will fall due to worries over increased financial risks,’’ said local brokerage Meritz Securities in a report to clients.
``It’s negative for SK hynix. We don’t think it will end up with the deal,’’ said Seo Wok-suk, an analyst at Korea Investment.
Elpida Memory filed for bankruptcy protection in late February. Other bidders for the company, which was delisted from the Tokyo Stock Exchange (TSE) are Micron Technology of the United States, U.S.-based private equity firm TPG Capital and China’s Hony Capital.